ScS sofa chain upbeat over investor talks

Jun 15 2008

Struggling sofa chain ScS Upholstery today attempted to offer some comfort over its financial position as its fundraising talks with investors continue.

The firm, which has branches at Aintree, Speke, Chester, St Helens and Warrington, has been hit by falling demand for “big ticket” items in a cooling housing market and last week an insurer refused to cover five of its suppliers against the company being unable to pay them.

Accountants Ernst & Young are working on a restructuring of the business with KPMG lined up as administrators if the deal falls through, the Sunday Times said.

Following the reports an ScS spokeswoman said: “Currently we are cash positive with no net debt. The company and its advisers continue discussions with a number of external parties to raise additional working capital.”

The spokeswoman added that the company’s finances were considered strong enough to deal with the tough trading conditions.

But the “unexpected and sudden” withdrawal of credit insurance had strained the finances of ScS and its suppliers’ capital requirements, which the business was “working to address”. She refused to comment on Ernst & Young and KPMG’s reported involvement.

Shares in ScS slumped last week, leaving the company - worth around £190 million less than two years ago - with a stock market value of less than £4 million. The group has around 1,500 staff.

In May it warned of an annual loss after worse-than-expected trading over the crucial bank holiday weekend at the beginning of the month.

The major trading period for furniture stores was “particularly disappointing” as like-for-like sales orders plunged by a fifth compared to the previous year.

Analysts who previously hoped for a break-even performance are now braced for a loss of around £1.6 million for the year to July.

Mounting gloom over house prices has hit a host of retailers as a slowing market affects sales of goods such as sofas, washing machines and carpets.